If you own 200,000 shares of stock in a company with 8 million shares outstanding and the company issues an additional 2 million shares to its employees through stock options,your ownership percentage:
A)remains the same because the company now has more assets.
B)falls from 2.5% to 2%.
C)remains the same because the company now has fewer liabilities.
D)increases because the company now has more stock outstanding.

Question

Quizplus · Accepted Answer

The total number of shares outstanding increases from 8 million to 10 million, so your ownership percentage decreases because your shares now represent a smaller portion of the total shares outstanding. Specifically, your ownership percentage falls from 2.5% (200,000/8,000,000) to 2% (200,000/10,000,000). The increase in stock outstanding does not necessarily mean the company has more assets or fewer liabilities.

If You Own 200,000 Shares of Stock in a Company